When the year started, the real estate industry in India was hopeful of a turnaround. In line with the expectations, the industry registered promising growth in the initial months. However, as the Black Swan event spread like wildfire, markets started staggering, with a drastic slowdown in sales. The industry showed some limited manoeuvring by embracing the digital medium.
The repo rate cuts and liquidity infusion by the government were also helpful as it reduced home loan rates. The developer fraternity also introduced attractive payment plans to arrest any steep decline in sentiments.
Once the lockdown was suspended, markets started reviving, despite a slowdown in business activities weighing on the overall economy. Finally, in the last quarter, the 2019 growth numbers were restored, and the industry reached near normalcy. The euphoria that started with the festive season has led up to year-end, clocking a 75-85% quarterly surge in sales.
Talking about commercial real estate, sentiments have been more dismal as most of the companies deferred or cancelled their leasing decisions in Q2. However, markets started to revive in Q3, with a rise in leasing activities driven by BFSI, FMCG, e-commerce retail, wellness and healthcare, etc.
Overall, it was a tough year for real estate in India, as most of the other industries. However, the year saw a growing thrust towards digitization and technology adoption, chronicling a new era in the industry. There has been an incremental rise in investment activities in the market, as Real Estate offers safe, sound, and tangible investment options. Urban Indians are increasingly realizing the importance of owning a home, which is a healthy sign for the long-term future of the industry.
As healthy moderation in the economy sets in, the real estate industry will continue to revive and bounce back. Sales numbers have significantly jumped in most of the major cities in India in the last quarter, painting a positive picture for the coming year. Most of the rating agencies and banks such as Moody's and S&P have also estimated that the Indian economy is set to grow in the range of 8-10% in FY 2021. This will further push demand.
In 2021, organic growth will be the way forward, as the crisis has reinforced the need to own a home amongst Indians. Lowered home loan rates, attractive payment plans, and the depreciated value of the rupee will also feed into demand.
In commercial real estate, markets will continue to recover as leasing activities will gain momentum. Apart from office leasing, co-working spaces, warehouses, and data centers are expected to register a sharp increase in leasing.
The government is also expected to implement the Model Tenancy Act, which will bring a balance between tenant-landlord relationships and boost the rental markets.
Rapid technological change will continue to unfold in Indian real estate. Although Indian realty has been steadily opening up to technology over the past few years, the COVID crisis has expedited the entire cycle. As physical interactions were limited, realtors were forced to adopt digital adoptions such as online viewing & transaction, digital launch, virtual property show & exhibition, gamification, online reputation management, etc. The uptrend will continue in the times to come. Increasingly, there will be a growing emphasis on data & analytics, machine learning, and artificial intelligence in Indian real estate.
Growth in Alternative Investment
New mechanisms of developers' funding will unfold. The market is suffering from large piles of unsold inventory, which are roughly to the tune of 450,000 units. As leverage for developers is becoming scarce, there will be a growing proliferation of Alternate Investment Funds (AIF). We have ourselves partnered with Rising Straits, a leading real estate Private Equity body, to launch an AIF that will do bulk buying of stressed real estate assets and offer kickstart funding. In January our initial fund is expected to raise INR 100 Crores from the market. In 2021, in total we are targeting INR 500 Crores. Such alternate investment mechanisms are set to grow further in 2021.
Authored by: Ankit Kansal, Co-Founder & MD, 360 Realtors